Nonlinear relationships
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Nonlinear Relationships. Chapter 7. Prepared by Vera Tabakova, East Carolina University. Chapter 7: Nonlinear Relationships. 7.1 Polynomials 7.2 Dummy Variables 7.3 Applying Dummy Variables 7.4 Interactions Between Continuous Variables 7.5 Log-Linear Models. 7.1 Polynomials.

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Chapter 7

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Nonlinear relationships

Nonlinear Relationships

Chapter 7

Prepared by Vera Tabakova, East Carolina University


Chapter 7 nonlinear relationships

Chapter 7: Nonlinear Relationships

  • 7.1 Polynomials

  • 7.2 Dummy Variables

  • 7.3 Applying Dummy Variables

  • 7.4 Interactions Between Continuous Variables

  • 7.5 Log-Linear Models

  • Principles of Econometrics, 3rd Edition


    7 1 polynomials

    7.1 Polynomials

    7.1.1 Cost and Product Curves

    Figure 7.1 (a) Total cost curve and (b) total product curve

    Principles of Econometrics, 3rd Edition


    7 1 polynomials1

    7.1 Polynomials

    Figure 7.2 Average and marginal (a) cost curves and (b) product curves

    Principles of Econometrics, 3rd Edition


    7 1 polynomials2

    7.1 Polynomials

    Principles of Econometrics, 3rd Edition


    7 1 2 a wage equation

    7.1.2 A Wage Equation

    If Deriv < 0 => Exper < -β3/2β4 ,

    or Exper> β3/2β4 .

    Principles of Econometrics, 3rd Edition


    7 1 2 a wage equation1

    7.1.2 A Wage Equation

    Principles of Econometrics, 3rd Edition


    7 1 2 a wage equation2

    7.1.2 A Wage Equation

    Where 33.47 is the ‘turning point’

    Principles of Econometrics, 3rd Edition


    7 2 dummy variables

    7.2 Dummy Variables

    Principles of Econometrics, 3rd Edition


    7 2 1 intercept dummy variables

    7.2.1 Intercept Dummy Variables

    Principles of Econometrics, 3rd Edition


    7 2 1 intercept dummy variables1

    7.2.1 Intercept Dummy Variables

    Figure 7.3 An intercept dummy variable

    Principles of Econometrics, 3rd Edition


    7 2 1a choosing the reference group

    7.2.1a Choosing The Reference Group

    Principles of Econometrics, 3rd Edition


    7 2 2 slope dummy variables

    7.2.2 Slope Dummy Variables

    Principles of Econometrics, 3rd Edition


    7 2 2 slope dummy variables1

    7.2.2 Slope Dummy Variables

    Figure 7.4 (a) A slope dummy variable. (b) A slope and intercept dummy variable

    Principles of Econometrics, 3rd Edition


    7 2 2 slope dummy variables2

    7.2.2 Slope Dummy Variables

    Principles of Econometrics, 3rd Edition


    7 2 3 an example the university effect on house prices

    7.2.3 An Example: The University Effect on House Prices

    Principles of Econometrics, 3rd Edition


    7 2 3 an example the university effect on house prices1

    7.2.3 An Example: The University Effect on House Prices

    Principles of Econometrics, 3rd Edition


    7 2 3 an example the university effect on house prices2

    7.2.3 An Example: The University Effect on House Prices

    Principles of Econometrics, 3rd Edition


    7 2 3 an example the university effect on house prices3

    7.2.3 An Example: The University Effect on House Prices

    Principles of Econometrics, 3rd Edition


    7 2 3 an example the university effect on house prices4

    7.2.3 An Example: The University Effect on House Prices

    Based on these regression results, we estimate

    • the location premium, for lots near the university, to be $27,453

    • the price per square foot to be $89.12 for houses near the university, and $76.12 for houses in other areas.

    • that houses depreciate $190.10 per year

    • that a pool increases the value of a home by $4377.20

    • that a fireplace increases the value of a home by $1649.20

    Principles of Econometrics, 3rd Edition


    7 3 applying dummy variables

    7.3 Applying dummy variables

    • 7.3.1 Interactions Between Qualitative Factors

    Principles of Econometrics, 3rd Edition


    7 3 1 interactions between qualitative factors

    7.3.1 Interactions Between Qualitative Factors

    Principles of Econometrics, 3rd Edition


    7 3 1 interactions between qualitative factors1

    7.3.1 Interactions Between Qualitative Factors

    Principles of Econometrics, 3rd Edition


    7 3 2 qualitative factors with several categories

    7.3.2 Qualitative Factors with Several Categories

    Principles of Econometrics, 3rd Edition


    7 3 2 qualitative factors with several categories1

    7.3.2 Qualitative Factors with Several Categories

    Principles of Econometrics, 3rd Edition


    7 3 3 testing the equivalence of two regressions

    7.3.3 Testing the Equivalence of Two Regressions

    Principles of Econometrics, 3rd Edition


    7 3 3 testing the equivalence of two regressions1

    7.3.3 Testing the Equivalence of Two Regressions

    Principles of Econometrics, 3rd Edition


    7 3 3 testing the equivalence of two regressions2

    7.3.3 Testing the Equivalence of Two Regressions

    Principles of Econometrics, 3rd Edition


    7 3 3 testing the equivalence of two regressions3

    7.3.3 Testing the Equivalence of Two Regressions

    Principles of Econometrics, 3rd Edition


    7 3 4 controlling for time

    7.3.4 Controlling for Time

    7.3.4a Seasonal Dummies

    7.3.4b Annual Dummies

    7.3.4c Regime Effects

    Principles of Econometrics, 3rd Edition


    7 4 interactions between continuous variables

    7.4 Interactions Between Continuous Variables

    Principles of Econometrics, 3rd Edition


    7 4 interactions between continuous variables1

    7.4 Interactions Between Continuous Variables

    Principles of Econometrics, 3rd Edition


    7 4 interactions between continuous variables2

    7.4 Interactions Between Continuous Variables

    Principles of Econometrics, 3rd Edition


    7 4 interactions between continuous variables3

    7.4 Interactions Between Continuous Variables

    Principles of Econometrics, 3rd Edition


    7 5 log linear models

    7.5 Log-Linear models

    7.5.1 Dummy Variables

    Principles of Econometrics, 3rd Edition


    7 5 1a a rough calculation

    7.5.1a A Rough Calculation

    Principles of Econometrics, 3rd Edition


    7 5 1b an exact calculation

    7.5.1b An Exact Calculation

    Principles of Econometrics, 3rd Edition


    7 5 2 interaction and quadratic terms

    7.5.2 Interaction and Quadratic Terms

    Principles of Econometrics, 3rd Edition


    7 5 2 interaction and quadratic terms1

    7.5.2 Interaction and Quadratic Terms

    Principles of Econometrics, 3rd Edition


    Keywords

    Keywords

    • annual dummy variables

    • binary variable

    • Chow test

    • collinearity

    • dichotomous variable

    • dummy variable

    • dummy variable trap

    • exact collinearity

    • hedonic model

    • interaction variable

    • intercept dummy variable

    • log-linear models

    • nonlinear relationship

    • polynomial

    • reference group

    • regional dummy variable

    • seasonal dummy variables

    • slope dummy variable

    Principles of Econometrics, 3rd Edition


    Chapter 7 appendix

    Chapter 7 Appendix

    • Appendix 7 Details of log-linear model interpretation

    Principles of Econometrics, 3rd Edition


    Appendix 7 details of log linear model interpretation

    Appendix 7 Details of log-linear model interpretation

    Principles of Econometrics, 3rd Edition


    Appendix 7 details of log linear model interpretation1

    Appendix 7 Details of log-linear model interpretation

    Principles of Econometrics, 3rd Edition


    Appendix 7 details of log linear model interpretation2

    Appendix 7 Details of log-linear model interpretation

    Principles of Econometrics, 3rd Edition


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